In a bid to trim healthcare costs, Royal Oak, Ferndale and Madison Heights are getting ready to open their own healthcare center for municipal employees.

The center will be created in the lower level of Madison Heights City Hall. The staff will include a doctor, nurses or physician assistants and have a small pharmacy.

“We had to find a way to lower healthcare costs without putting more costs on our employees,” said Ferndale City Manager April Lynch.

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Royal Oak City Commissioners this week approved joining the other two cities in establishing the health and wellness center.

Royal Oak City Manager Don Johnson outlined the benefits in a memo for commissioners and said the healthcare center will save money once more than 20 percent of employees participate.

The center will not require employees to pay a co-pay for a doctor’s visit or prescriptions for generic drugs.

“The physician dispenses prescribed generic medications to patients on-site and free of charge, eliminating the need to go to a pharmacy in many cases,” Johnson said.

Municipal employees and their dependents can still use their own primary care doctors, or visit the healthcare center, or do both. Johnson said the center is an additional option for an employee.

“Lab and diagnostic testing are handled on-site,” he said. “Health and wellness centers focus on identifying high-risk patients through biometric health screening, and actively engaging and managing patients’ chronic health conditions over the long term.”

The cities save money because the cost of running the clinic is negotiated and set in advance at a price below what employers have to pay for their portion of expenses when an employee uses health insurance. The doctor is paid an hourly rate rather than a percentage of fees for each patient.

With the ease of access and the lack of co-pays for doctors and prescriptions, employees are expected to have enough financial incentive to use the clinic, Johnson said.

Royal Oak, Madison Heights and Ferndale selected CareHere, headquartered in Brentwood, Tenn., to manage the clinic. CareHere, a medical management company, recently opened the first employer-sponsored healthcare center in the state in Battle Creek.

Representatives from the management company told Royal Oak city commissioners that about 35 percent of employees can be expected to use the clinic in the first year. By the third year, employee use rates are projected to be about 55 percent.

Johnson said if Royal Oak employees use the clinic at those rates the city could save $480,000 over three years.

Similar clinics are more common than in the private sector, Lynch said.

“CareHere opened their first clinic in Michigan in February and they are way above their projected savings,” she said. “Battle Creek is beyond pleased with their first quarter numbers.”